Saturday, March 18, 2017

The Debt Problem

I remember when I was in college in the early 90s and I received my first credit card offer. It seemed absurd to me. I had grown up in a time when only solidly established, middle-class people were able to have credit cards and most of the didn't. Yet there I stood, in the dirty kitchen of a run-down college rental, holding a credit card offer with a line of up to $1,000 in my hand.

I accepted with some trepidation. All over the country, the same thing was happening to other young men and women. For the most part, we accepted the offers with varying amounts of enthusiasm. And then the fun started.

The Era of Good Feeling: Full Employment and Cheap Credit

Being a young American man in the 90s was wonderful. The employment levels went up to the point where it was relatively easy to get a job anytime that you wanted. I recall quitting jobs that I held during college for virtually no reason, other than I wanted a break. I was sure to pick up another one whenever I wanted.

Furthermore, I had a credit card! Nothing was out of my grasp.

Admittedly, I did not go crazy with my credit card. I had been raised to be frightened of debt and I kept the card in my wallet for an emergency.

The Other Side of the Coin

But I did not need to go crazy with the card. Nor did my peers. The cards would creep into our lives if they did not charge into them.

And those jobs? Sure, we could get jobs whenever we wanted them but they were not great jobs. I'm not saying that they were not genuine jobs being created back then, requiring good educations and high skill levels. But the the loss of the manufacturing jobs that our fathers had was masked by a proliferation of low-skilled, part-time service jobs that were advantageous for single young men and women looking to lead frivolous lives. These jobs were not foundations for careers, though.

So many of us staggered through the 90s. We had a great time, but by the time the dot-com bubble burst in 2000/2001, we were in debt up to our ears with multiple credit cards.

Even riding this debt, banks loaned us money during these years and many of us bought houses. I did. And as the house appreciated in value, I and many of my peers treated our property like a credit card. We refinanced and took the equity as cash to support our lifestyles.

The sad thing is, looking back, is that we didn't even really have enough with these credit cards and HELOCs to live lavishly. We bought better groceries that we might have otherwise. We bought nicer cars than we night have otherwise but we were not driving ferraris and flying to France on a whim. Maybe that would have made the coming credit debacle worth it.

American Debt in History

When the debt began to overcome me at this time, I was initially wracked with shame. I felt that I had lowered myself and become something less than a man. I was a debtor, like those poor souls sent overseas from Britain to penal colonies.

While I am certainly not proud of the mess that I had made for myself, I look back on it with a little more perspective now. It turns out that some of history's most admired men were terribly irresponsible debtors. Thomas Jefferson and James Monroe were both swimming in debt when they died.

This is not meant to excuse my financial irresponsibility. I just came to realize that I was in good company when it came to debt and I was not the only man who had fallen victim to fiscal carelessness.

Where Do We Go from Here?

If you are like me and are trying to come to grips with your financial failures, you need to go cold turkey. This is easy advice to give but not the easiest to heed. However, anyone who has dealt with a drug addiction may know that this is the only way to get out.

Cut the credit cards. They're maxed out anyway, right? As for how you manage life after that dramatic move, there will be more articles to come.